Annual Compliance of Nidhi Company

Nidhi companies registered under the provisions of the Companies Act, 2013 are a major force for promoting thrift and mutual benefit. Many of these firms have been categorized as NBFCs (non-banking financial companies), which mostly accept deposits and provide loans to their members. Nevertheless, for the sake of transparency and accountability as well as to prevent fraudulent activity from taking place in Nidhi companies, they must fulfil annual compliance obligations. It must put these measures into place to build confidence among its members and supervisors.According to the Nidhi Rules, 2014 and Companies Act, 2013.Several important compliance items must be completed each year for the Annual Compliance of Nidhi Company, including filing the annual financial statements, holding an AGM (annual general meeting), and furnishing information to MCA. If these obligations are not complied with, however, the company may be subject to punishment or legal action and even perhaps lose its status as a Nidhi corporation. Nidhi companies ought to employ a legal expert or company secretary who well understands the regulations and can ensure that everything runs smoothly. Nidhi companies must keep accounts and books, do auditing, and submit forms and returns as required by law--all in the prescribed timescales.

Types

Annual compliance for the Nidhi company is what annual requirements and legal obligations that a Nidhi member must meet each year. In India, Nidhi Companies are governed by the Nidhi Rules 2014 of the Company Act 2013. The specific Annual Compliance of Nidhi Company are as follows:

1. Annual Returns: The annual returns of a Nidhi company must be filed with the Registrar of Companies (ROC) within sixty days after the completion of its financial year. Examples include the financial statements, shareholding’s structure, directors and so on.
2. Financial Statements: Nidhi Companies must draw up a set of financial statements--a balance sheet and profit and loss account as well as a cash flow statement. Such statements shall be drawn up by the relevant accounting standards.
3. Statutory Audit: Each year Nidhi Companies should have an audit by a practising Chartered Accountant. The auditor will then check the company's financial statements and issue an audit report. The audit report will be attached to the annual returns filed with the ROC.
4. Board Meetings: A Nidhi Company, however, must have at least four board meetings each year. Two board meetings must be held at most 120 days apart and not less than once per quarter of the fiscal year.
5. Filings with ROC: In addition to annual returns, Nidhi Companies must submit several other forms and returns with the ROC. For instance, these include such significant events as the appointment and withdrawal of directors or changes in share capital.
6. Statutory Registers: There are numerous statutory registers that Nidhi Companies need to keep, including such things as the Register of Members and Directors, and the Loan book. Deposit Book etc., should be maintained up-to-date for inspection by shareholders and government agencies.
7. Compliance with Nidhi Rules: The Nidhi Rules, 2014 outline certain requirements that Nidhi’s must adhere to such as minimum net owned funds requirement and limit on deposits.

Requirements

Nidhi Companies are subject to the Annual Compliance requirements ofthe Companies Act, 2013 and related rules and regulations. Below stated are the requirementsof Annual Compliance of Nidhi Company:

1. Appointment of statutory auditor: All Nidhi Companies must have the auditing of their annual financial statements carried out by a statutory auditor. This auditor had to be a professional qualified by, but independent of the company.
2. Preparation of financial statements: The company should complete its year-end financial statements, including the balance sheet and profit and loss statement.
3. Holding of Annual General Meeting (AGM): Nidhi company must organize an AGM within six months of the year-end to report and pass financial statements.
4. Filing of Annual Return: It should file its Annual Return to the Registrar of Companies (ROC) in the prescribed form within 60 days after the AGM.
5. Maintenance of statutory registers: To meet the requirements of the Companies Act, Nidhi must be compliant and keep several statutory registers including those for Members, Directors 'Shareholders,' Director's Registry, etc.
6. Compliance with the Insider Trading regulations: If the Nidhi Company is listed on any stock exchange, then it will be subject to insider trading regulations (see Securities and Exchange Board of India).
7. Compliance with the Foreign Exchange Management Act (FEMA): For example, in each case, if we find that the Nidhi Company has received or paid out foreign direct investment (FDI) it must follow those provisions of FEMA.
8. Timely payment of taxes: It is a requirement that the company pay various taxes (including income tax, GST and so forth) on time.
9. Compliance with the Companies (Management and Administration) Rules: The Nidhi Company shall also observe several rules stipulated in the Companies (Management and Administration) Rules, 2014. Such rules cover matters such as how the registers are kept, documents filed, meetings conducted etc.
10. Maintenance of proper books of accounts: The company must keep good books of accounts detailing all receipts and payments, vouchers, invoices, bills paid etc.
11. Compliance with the Reserve Bank of India (RBI) guidelines: After all, the Nidhi Companies are supervised by the RBI and together with other legal banking rules must adhere to its guidelines for these companies 'functioning, deposit acceptance, loans etc.
12. Compliance with the Consumer Protection Act: As a financial company, Nidhi Companies are subject to the provisions of the Consumer Protection Law 2019 requiring them to offer reasonable and clear services as well as settle complaints or disputes expeditiously.

Advantages

Annual compliance for a Nidhi Company in India is essential for maintaining transparency, accountability, and legal compliance. Here are the advantages of ensuring Annual Compliance of Nidhi Company:

1. Compliance with the law: Fulfilling the annual compliance requirements ensures that the Nidhi Company complies with the provisions of the Companies Act, 2013, and other relevant laws and regulations applicable to the company. This helps avoid legal disputes and penalties.

2. Enhanced credibility: By meeting the annual compliance obligations, the Nidhi Company demonstrates its commitment to good corporate governance practices. This enhances its credibility and reputation among stakeholders, including investors, customers, and lenders.

3. Reduced legal risks: Annual compliance ensures that the company operates within the legal framework, minimizing the risk of any legal action or regulatory intervention. This protects the company's interests and safeguards its operations.

4. Improved corporate image: Complying with annual requirements reflects a professional and responsible approach towards business operations. This results in an improved corporate image, attracting potential investors, customers, and partners.

5. The smooth functioning of operations: Annual compliance ensures that the company maintains accurate financial records, holds regular meetings, and follows proper procedures for decision-making. This promotes the smooth functioning of the company's operations, leading to efficient management.

6. Access to finance: Compliance with the law and having updated financial statements puts the Nidhi Company in a better position to obtain funding from banks, financial institutions, and other sources. Lenders and investors prefer companies that display financial transparency and sound governance practices.

7. Compliance with banking regulations: Nidhi Companies are regulated by the Reserve Bank of India (RBI). By meeting the annual compliance requirements, the company ensures compliance with the guidelines issued by the RBI, thus maintaining its status as a Nidhi Company.

8. Value creation for shareholders: Ensuring proper financial reporting and disclosure, to display the company's soundness and performance is checked annually. This allows shareholders to get involved and provides a basis for their investment.

9. Protection of stakeholders' interests: Through adherence to annual compliance requirements, the Nidhi Company is serving its stakeholders--shareholders, employees, customers, and suppliers. This gives confidence that the company acts within its legal limits and is fulfilling its responsibilities to stakeholders.

10. Availability of legal remedies: If it should turn out that other parties do not fully comply with or respect the statute, in possible future legal disputes a Nidhi Company which has fulfilled its annual compliance obligations will have a relatively secure position and recourse to outside help.

Documents

The Documents required for Annual Compliance of Nidhi Company are as follows:

1. The balance sheet, profit and loss statement and cash flow statements are all printed on the financial pages.
2. The company's financial statements have been audited.
3. Form MGT-7 Annual Return.
4. Board of Directors' report.
5. Minutes of the Annual General Meeting and all other board meetings during each year.
6. Register of Members, recording the company's shareholders.
7. Register of Directors that includes information on directors.
8. Directors 'Shareholding Register, recording the shareholding of directors.
9. Loan, investment, and guarantee register.
10. The statutory registers (register of charges, register of debentures holders, register of contracts and so forth).
11. Resolutions passed by the board and general shareholders 'meetings over the year.
12. Tax-related documents and income tax returns.
13. Relevant business tax documents (if applicable) and GST returns.
14. Documents related to the Nidhi Company's operations and regulations.

Process

The process of Annual Compliance of Nidhi Company:

1. Board Meeting: Conduct a board meeting within 30 days of the end of the financial year to review and adopt its annual statements, report or any other issues relating to compliance.
2. Financial Statements: Draw up the financial statements--balance sheet, profit and loss statement, cash flow statement--based on accounting standards.
3. Auditor Appointment: Hire an auditor who can audit the company's books. The auditor must be a practising Chartered Accountant.
4. Auditor's Report: The auditor's report on financial statements. The auditors will render their judgment as to the fairness and accuracy of financial statements.
5. Annual Return: Complete the Form NDH-4 (annual return) and file it with the Registrar of Companies. In the annual return, information must be provided on the firm and its members as well as an account of how it has been operating throughout that financial year.
6. Financial Audit: Allow the appointed auditor to conduct a check of company accounts. The auditor will examine the financial data, and procurement activities, and check whether legal regulations have been adhered to.
7. Statutory Registers: Make sure that all the required statutory registers (i.e., Register of Members, Directors 'Register and Loans or Investments) are kept up to date.
8. Income Tax Returns: Within the time limit, file the income tax returns of the company with the Income Tax Department. The Nidhi Companies were generally exempt from income tax if they met these required conditions stipulated under the Income Tax Act, of 1961.
9. GST Compliance: If the Nidhi Co. is subject to Goods and Services tax then, among other things like promptly filing returns or paying taxes owed be sure that you don't violate GST rules.
10. Annual General Meeting: Hold the Annual General Meeting within six months of year-end. At the time of holding an Annual General Meeting, one must present audited financial statements; company matters should also be discussed and members 'concerns addressed.
11. Director Report: Draw up the Director's Report, a review of the company activities and financial situation as well as prospects for the future. The Director's Report must be appended to the financial statements and submitted to the RoC.
12. Compliance Certificate: Receive a certificate of compliance from the Company Secretary in Practice, stating his belief that all relevant provisions of the Companies Act 2013 and Nidhi Rules have been complied with.
13. Record Keeping: Keep proper records for all documents substantiating compliance, financial statements and auditor's reports. These records are to be kept for at least 8 years after the end of a financial year.

Why Adviso?

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